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# Reference-Dependent Preferences and Sentiment-Driven Asset Prices

## Details

**Authors** Benhabib et al.

**Year** 2026

**Publisher** The Journal of Finance

**Discipline** Economics

[Read it at the publisher](https://doi.org/10.1111/jofi.70079) 
10.1111/jofi.70079

## In authors' words

### What they found (results)

A general-equilibrium asset-pricing model shows expectations-based reference-dependent preferences generate self-fulfilling risk panics via a feedback loop between current prices and perceived future downside risk, explaining excess volatility, asymmetric volatility, and asymmetric sentiment over the business cycle.

## Commentary

### In short

Asset values are shown to depend on investors' reference point (a perspective that reframes identical fundamentals), which then feeds back causally into prices, coupling a perspective-dependent valuation to a relational feedback loop.

**Patterns it shows** R, P

**Added** 2026-08-25

**How to cite this** Benhabib et al. (2026). Reference-Dependent Preferences and Sentiment-Driven Asset Prices. The Journal of Finance.